Credit: Jennifer Tapias Derch
Ideas Made to Matter
Making the business case for a chief data officer
Companies are doing more than paying lip service to data-driven decision-making these days; many have added a chief data officer to their already crowded executive ranks. But the question remains whether this once obscure position can deliver enough business value to justify its existence.
According to NewVantage Partners' “2021 Big Data and AI Executive Survey,” the CDO, who had a home in only 12% of companies in 2012, is now a fixture in 65% of them.
Despite the swelling ranks, the responsibilities, focus, and reporting structure for chief data officers remain in flux, often varying by company.
There are also constraints on the CDO domain. The NewVantage survey found that only half of chief data officers (49.5%) have primary responsibility for data within their firms, and only a third characterized the CDO role as “successful and established.”
The lack of clarity may explain why many find it difficult to quantify the business value of a chief data officer.
Doug Laney, a data and analytics innovation fellow at tech consultancy West Monroe and the author of the book “Infonomics,” maintains that making a business case for the CDO is actually pretty straightforward.
Since 2018, Laney has conducted an ongoing study of more than 500 organizations exploring data management and data analytics challenges. His research shows that companies that treat data as a corporate asset and make it central to enterprise business strategy are three to four times more likely to reap the benefits of data-driven decision-making.
Specifically, Laney found such organizations are leveraging data more effectively than their counterparts in three important ways:
- In guiding strategic insights and decision-making.
- In improving business process performance.
- In transforming business processes, products, and services.
To achieve that level of data transformation requires executive stewardship, said Laney, who presented his ideas at the 2020 MIT CDOIQ Symposium. Thus the foundational argument for establishing a formal CDO role.
CIO as boss or colleague?
Too many companies default to handing data oversight to an already overburdened CIO, operating under the assumption that the people who manage data technology are also the best ones to deploy it strategically across the organization.
That’s not often the case, Laney said.
“Most companies have an IT organization, but they haven’t thought of the benefits and possibilities of decoupling the ‘I’ from the ‘T’ and managing information and technology as separate assets,” Laney said.
That’s where the chief data officer comes into play. The CDO functions as the general caretaker of data, responsible and accountable for all the organization’s information assets, including processes around availability, quality, security, and making data usable across the business, according to Laney’s definition.
While the chief data officer’s mandate might vary, the qualities that make for a strong CDO are universal, according to Della Shea, the data chief for Symcor, which provides consulting and transformation services in the area of payment processing and fraud detection.
Successful leaders must understand the core tenets of data management and new technologies, but don’t necessarily have to hail from technical roles, Shea said.
Laney characterizes two types of CDOs. One who acts in a consultative capacity, developing data strategies, overseeing data governance efforts, and reporting in to the CIO or COO. The other is an independent executive who holds full accountability for all things data-related across the organization, reporting directly to the CEO or executive team.
Laney’s research shows that fewer than 40% of CDOs are currently in the latter category, but he contends that is the preferable scope and structure of the job to fully capitalize on its value.
Organizations that allocate the right resources, influence, and authority to the CDO are four times more likely to be successful using data to transform the business, according to Laney’s research. By comparison, organizations turning to the CIO to oversee data management and strategy are only half as likely to see business impact from advanced analytics initiatives.
“There is a natural tendency to give data oversight to the CIO, but the reality is they already have so much on their plate,” agreed Dan Vesset, group vice president of analytics and information management at market researcher IDC.
“That approach shortchanges the importance of what it takes. You need a dedicated function, along with resources, strategy, and someone to be in charge of the people responsible for data,” Vesset said. “There’s a lot of change management involved, as well as internal communication and collaboration.”
Enter the executive CDO
Depending on the business strategy, the CDO can have a wide-ranging impact, whether that’s helping to improve marketing, optimizing supply chain operations, or streamlining business processes to reduce costs.
“The benefits are really dependent on the individual business,” Vesset said. “I’m hard-pressed to come up with a situation where data doesn’t drive decision-making.”
Beyond meeting specific business objectives, there are operational ways CDOs can and should deliver enterprise value. Among them:
Breaking down silos. This is critical to enabling the organization to effectively leverage data across the business to improve business processes.
“Whether it’s fraud detection, credit scoring, or supply chain visibility, to make better decisions in these areas you need complete data,” Vesset said.
Information silos not only create downstream challenges for optimal decision-making, they are a drag on worker productivity.
“People spend 60% to 80% of their time trying to find data and dealing with data-quality issues to get it ready for analysis,” Vesset said. “It’s a huge productivity loss when you are spending a substantial amount of time recreating data assets that exist somewhere else in the organization because you simply lack internal visibility. That’s money left on the table.”
Promoting data democratization and data literacy. According to Laney, 40% of companies hoard data or share it begrudgingly, and only 18% consider data as an enterprise asset. Moreover, while most organizations follow strict asset-management disciplines to manage financial, physical, or even human capital assets, they don’t apply the same structures or rigor to managing data assets.
Under a CDO’s stewardship, that dynamic can change. Laney’s study shows that organizations with executive chief data officers are three times more likely to share data freely among individuals and departments than those without the position.
An executive CDO is more likely to codify the policies, procedures, and cultural shifts necessary to democratize data and promote data literacy compared to organizations with a CIO or director-level manager in charge of data assets, Laney said.
Monetizing data. Based on Laney’s data, about 10% of organizations license their data to others or exchange data for goods or services. But CDOs, particularly those with revenue responsibility, are incented to innovate ways to monetize data, either offering it as a product or generating measurable economic benefit in other ways.
Laney said organizations with an executive CDO are seven times more likely to generate cash by sharing or selling data externally and are three times more likely to generate other forms of commercial data by sharing their data assets with external players.
Supporting new products and services. Lead by the CDO, data initiatives can inform new product directions and provide insights on how to evolve existing offerings to meet the demands of the marketplace.
That is how Shea views her role at Symcor. As the chief executive responsible for data, Shea isn’t expected to come up with all the ideas to leverage data assets — functional business owners in marketing, sales, and other departments shoulder much of that task.
Rather, her job is to envision the new operating models that are necessary to support that leveraging of data as an asset and to manage the associated risks.
“I help design and frame products so they’re successful in the marketplace to reflect the expectations of regulators, clients, and individuals,” Shea said.
“The risk of inadequate or mismanagement of data assets … exposes us to loss of value, trust, or reputation,” Shea said. “I’m all about identifying the things that need to be in place from a data governance perspective that are tied to the delivery of the product.”
Shea said the definition of a chief data officer’s responsibilities might be different at another company, one with more of a focus on data analytics, for example.
“The CDO role needs to be defined by the objectives and priorities of the company in order to be successful,” Shea said.
A keen understanding of business strategy and an ability to connect data to core business objectives is critical, as is proficiency in softer leadership skills, particularly in the areas of change management and communications.
“Being able to communicate things that are intangible helps to garner trust from executive management,” Shea said. “You have to be able to speak the language of business and understand the use cases the business is trying to drive forward. Executive management is more likely to invest in these initiatives when you have a full understanding of the ‘what’ and they understand the ‘why.’”